Coinbase Report: FTX Crypto Asset Sales Unlikely to Cause Market Crash

Coinbase Report: FTX Crypto Asset Sales Unlikely to Cause Market Crash

Digital Asset Exchange Coinbase Says FTX Liquidation Will Not Impact Market

Coinbase, a digital asset exchange, has released a report stating that the  capacity liquidation of FTX’s cryptocurrency holdings won’t be have a negative effect on the market. There were concerns that the sale of FTX digital assets, valued at over $3.4 billion, would lead to a whole lot of price fall based on weekly trade volumes. Nonetheless, Coinbase describes that volume limitations regulated in each phase of the liquidation will prevent major market changes.

The liquidations will at the beginning be capped at $50 Million per week and gradually increase to a $100 Million cap in subsequent weeks. Contrary to previous speculations of an overnight sale worth $1.3 billion, FTX debtors and committees must approve a permanent $200 Million per week sale. Furthermore, certain “insider-affiliated” tokens require 10 days advance notice for selling.

Coinbase points out FTX can enter into hedging contracts with a licensed advisor but is limited to Bitcoin (BTC) and Ethereum (ETH). Approvals from creditors would be necessary for other coins. The company is likewise required to provide regular reports on balances, trades, sales, yields, market insights, and revenue-generating sources.

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A recent court order allows FTX to sell its cryptocurrency holdings directly or through investments to repay investors. The collapse of FTX in November 2022 had numerous effects on the market, including initial market downturns and concerns surrounding the sale of its assets.

Bankruptcy Proceedings Cause Market Concerns

The collapse of FTX led to whole lot of impacts on the market. A court filing outlines that the exchange holds around $7 Billion in assets, including digital currencies, investments, and Bahamian properties. Their Bitcoin holdings amount to $560 Million and Solana (SOL) holdings total $1.16 billion.

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FTX likewise has approximately $4.5 Billion in deal financial resources investments and real estate worth over $200 Million. Specialists previously speculated that the sale would heavily impact the market, prompting Tron’s Justin Sun to call for community support and express interest in bidding for some assets to mitigate market effects.

Solana (SOL) makes up a large portion of FTX’s assets, although a whole lot of amount is locked up due to vesting schedules. Regardless of this, Solana’s price dropped by 6% past week due to fears of a substantial FTX liquidation.

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Hot Take: Market Remains Stable Regardless of Fears

Regardless of concerns about the  capacity impact of FTX’s liquidation on the market, Coinbase’s report implies that volume limitations and regulated procedures will prevent whole lot of changes. The gradual increase in weekly caps for liquidations and the requirement for approvals from debtors and committees intend to secure controlled sales.

Furthermore, FTX’s capacity to enter hedging contracts with licensed advisors provides additional stability. Despite the fact that Solana’s price experienced a minor decline past week, the overall market has remained stable. As FTX proceeds with bankruptcy proceedings, it is important to monitor how the liquidation unfolds and its long-term effects on the cryptocurrency market.

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